The fight against cyber-hackers

The credibility of the EU’s emissions trading system (ETS) suffered a blow in January when it was discovered that hackers had stolen around two million emissions allowances from five national registries. The European Commission has recommended several security measures to national administrations in the hope of making the ETS more resistent to cyber fraud.

When news broke that thieves had stolen the allowances, worth around €30 million, the Commission responded by closing all national registries to prevent any further transactions.

The Commission argued that the thefts affected only 0.02% of the total value of allowances traded on the ETS annually. Nevertheless, it launched a review of security arrangements for national registries and proposed additional measures to improve security. On 20 April, when the Commission gave Lithuania permission to restart its national scheme, all the registries were back up and running.

The EU is now setting up a single, centralised ETS registry, to replace the national registries from January 2012. The EU registry will have a range of additional security features.

Market awareness

The Commission is also seeking to improve surveillance of the allowances market by including in a revision of legislation on trading in financial instruments the spot market for carbon (which deals with credits traded for immediate delivery). The proposal needs to be approved by national governments and the European Parliament.

Four-fifths of trading in carbon allowances takes place not on the spot market but on the futures market. That is already covered by financial-market regulation.

The Commission says that including the spot market in the legislation will ensure that all areas are subject to the same level of monitoring and surveillance.